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Why Voluntary Exchange Trumps “Sweatshop” Criticism

If sweatshops make poor countries better off, then we should allow them because even when benefits are radically disparate, any mutually beneficial exchange, voluntarily arrived at, is by definition non-exploitative and leads to a trend of increasing standards of living.

The power of voluntary exchange is that it naturally leads to two reinforcing effects.

First, it is most likely to capture maximum knowledge of the rational best interest of those parties involved in the exchange. Even if someone outside the exchange feels they have pertinent knowledge unavailable to one of the participants, the trade off would not be to get in between the two parties and take from one or both the final decision, it would be to provide the information to the party lacking it. In this way you are guaranteeing that those most likely to have the most knowledge (those with direct loss or gain at stake) are those also making the final trade decisions.

In the case of a sweatshop that is the employer and employee.

Second, voluntary exchange allows for the most rapid cycling of exchange decisions. The power of voluntary exchanges begins with ensuring the best knowledge is brought to bear on each decision, but that does not preclude bad decisions from being made. In the second feature though, we dilute the power of each bad decision by making it easy to change or correct a decision by making better decisions over multiple generations of exchanges.

Development, economic progress, increasing standards of living, invention and innovation all require a massive number of mistakes to occur and failures to be worked out in the efforts of trying to find a better solution to a present problem. Thomas Edison is often quoted (after he had FINALLY found the correct recipe/configuration for the incandescent lightbulb) as saying, “I did not fail 10,000 times… I found 10,000 ways NOT to make a lightbulb.”

I was once told that the power of the free market is not “efficiency,” as is regularly misstated, but instead that free market capitalism handles errors and waste with the least cost of any system.

The reason it has this feature is because without the central planning and direction of other forms of economics, it can quickly change heading, correct resource allocation, redirect effort away from unprofitable ventures and towards profitable ones.

In poor countries, where the choice is working in a field or at a table in an indoor factory, it is GOOD to be able to choose the factory, but it is even BETTER to be able to move jobs when another factory opens next door and that one has air conditioning, then to move again when the first factory adds air conditioning and lunch breaks, then again when a third factory opens offering some hea
lth insurance, and so on, and so on, and so on…

These successive generations of ever better decisions, including not only better work options but the worker themselves coming to know better what they want and need from a job (benefits differentiation), are the compounding interest of the economic development world. The feature of voluntary exchange built on mutual benefit that allows exponential improvements in standards of living within third world nations.

The best criticism of a defense of sweatshops as I have laid out above is that it almost is a rationalization for sweatshop existence. A get-out-of-jail-free-card for the free market libertarian leaning set, that allows them to sleep at night saying to themselves, “I know it’s terrible now, but it’s the best option and don’t worry, it will quickly get better.”

The problem with this viewpoint is that it might morally excuse complacency on the part of people to act against actual injustices. While I think the above argument is strong, does it abrogate the need to examine and hold to account a political system so damaged as to only have sweatshop employment available to it’s citizens? What if basic human rights violations and cancerous cronyism is rampant in a country? Can I truly sit back and say, but it will get better?

I think intense scrutiny should be placed on nations with poor records of property and human rights protections. If legitimate violations can be found, those need to be attacked. But in parallel we need not attack the very work opportunities that may allow citizens to rise up in economic pow
er and thus challenge oppressive cultures from the inside.

One thought on “Why Voluntary Exchange Trumps “Sweatshop” Criticism”

Replace arms length theorizing and try being “human.” Taken down to each of us below the “rich” line, we are victims of theories, in that reality proves any theory to be inadequate to the majority. The poor, and middle class have no choice but to surrender to power; we need limits to theory, not the extreme of rigidity. That’s the platform of the Bald Eagle Party: Balance!